Good news for investors and entrepreneurs: The New Jersey Biotechnology Task Force (Task Force) has published its final report and recommendations to expand the Angel Investor Tax Credit Program with the goal of incentivizing companies in the life sciences industry to either remain in or relocate to the state. These recommendations, if adopted, may also help certain New Jersey corporate investors that earn more than $1 million in income to offset the tax rate increase enacted with the recent passage of the state budget. The Task Force’s underlying rationales apply with equal force to tech and tech-enabled companies.
Currently, the Angel Investor Tax Credit Program, jointly administered by the New Jersey Economic Development Authority (NJEDA) and the New Jersey Division of Taxation, provides refundable tax credits against New Jersey corporation business and personal income tax liability for qualified investments in an emerging technology business with a physical presence in New Jersey that conducts research, manufacturing, or technology commercialization. (See the eligibility requirements for the program here.) The credit is currently worth 10% of a qualified investment with a cap of $500,000, but the Task Force has called for it to be increased to 25% with a cap of $500,000. Under the proposed expanded credit, for example, a corporate or individual investor could write off $500,000 from its state income tax bill as a consequence of making a $2 million qualified investment. This is a powerful incentive with both immediate and long-term benefits: investors enjoy immediate tax savings and increased ROI, companies enjoy increased access to capital, and the state becomes more attractive to technology, tech-enabled and life sciences enterprises.
The Task Force also recommends the relaxation of the employment requirement. Currently, investments qualify only if they are made in a company in which 75% of employees are qualified New Jersey employees. As the Task Force noted, however, “[i]t is common for young companies to not put their employees on payroll until just after the first funding round occurs.” Accordingly, the Task Force called for changes that would allow the NJEDA to measure employment up to 30 days post-investment.
Though the expansion of the angel tax credit program has not yet been introduced in the legislature, now is the time for supporters of the credit to show their backing for the expansion.
 The nonpartisan Task Force was created to improve communication between New Jersey state government and the biotechnology industry. It is comprised of six legislative members; two public members, including Debbie Hart, President and CEO of BioNJ, and Daniel O’Connor, Chief Executive Officer of OncoSec Medical Incorporated; and Timothy Lizura, President and Chief Executive Officer of the New Jersey Economic Development Authority, serving in an ex-officio capacity.